Shares in insurance claims expert Quindell (QPP:AIM) are fighting back after yesterday's investor panic that wiped nearly £1 billion from its market value amid a negative report from US-based short-seller Gotham City Research. Today sees the shares jump 16.3% to 27.63p, although that's still a long way off the 40p level seen earlier this month.
We suspect many investors are sitting on their hands until Quindell issues its full response to the critique of its rapid earnings growth, expected by the end of the week.
Ahead of that event, we've been in touch with Quindell founder and executive chairman Rob Terry to get his reaction to the research note, entitled 'Quindell PLC: A Country Club Built On Quicksand'. The document concludes with the line: 'When asked, Quindell refuses to answer simple questions about its business.' Terry says this is untrue.
'No one from Gotham has ever attempted to make any contact with myself or Laurence or to the best of our knowledge anyone else at Quindell,' insists Terry, who admits to being 'a little annoyed' as the events unfolded.
The reference to Laurence is finance director Laurence Moorse. So that's the two top dogs at Quindell which the chairman claims to have not even so much as chatted with Gotham.
Terry says 'the business continues to be in the best shape it ever has been and is setting new records every month.' He doesn't expect any delay to the long-mooted switch to London's main market from Aim. The chairman yesterday (22 Apr) confirmed that 'our prospectus was submitted to the UKLA (UK Listing Authority) for review on schedule in mid-April, so until this morning no problems at Quindell and only good news to report.'
Terry expresses his optimism for the future, even if in the face of short-term trials, by saying, 'I am sure the price will recover quickly as it did last time as (there's) no substance to any of the issues but what a waste of time.' Quindell last year had to calm investor nerves about an equity swap that led to its share price halving over three days.
Quindell's share price yesterday collapsed by 39% to 23.75p as Gotham accused the business and Rob Terry of a multitude of accounting and operating malpractices.
It is worth noting the disclaimer on the research note which says: 'You should assume that as of the publication date of this report, Gotham City Research stands to profit in the event the issuer's stock declines.'
Quindell didn't hang about in responding, issuing a quick-fire stock exchange announcement saying that it 'rejects the assertions raised in this note and considers the note to be highly defamatory, deliberately misrepresentative and entirely rejects the conclusions that are made.'
Within minutes Gotham issued its own reply via Twitter: 'We find Quindell's response (unsurprisingly) lacking in details. We also find their response defamatory to the Gotham City Research brand.'
Quindell plans to release a detailed response before the end of this week. We await that full response with interest and suspect what will emerge is a point-by-point rebuttal along similar lines to that issued by video search business Blinkx (BLNX:AIM) last month, after it was at the wrong end of similar accusations made by Harvard professor Ben Edelman.
Shares has long been a fan of the emerging growth story at Quindell, flagging the potential, as we see it, first back in June 2012 (see below) when the shares traded at just 5.63p, and have done so countless times since, not least at the start of this year. Our most recent view on the shares can be found here.
(Click to enlarge)